Spotlight Hobbies


Need to hear from Not Dean or Down the Hall from Dean on this one

The deeper story claimed an "upside-down" ratio of about 50 million in assets and cash, to about $400-500 million in debt, which is a big time haircut for whoever the receiver is, if one can be found.

That means that Revell, Moebius and anyone who with outstanding Hobbico receivables is going to get a 90% whack. Depending on how much product they had shipped, and what kind of insurance they carry, it could be a staggering loss to little guys who do not have much, if any cushion to absorb a loss of that magnitude.

Second helping of Not Good is who will take on the enterprise in the face of a cratering RC business and a slow- or no-growth plastic market, and where capitial comes to finance the operations. Don't expect another ESOP; that was one of the worst ideas since the Cimarron. Someone would have to get the remains for pennies to make it go.

The sheer crime of all of this is the same thing that happened to magazines, specifically the ex-Petersen EMAP empire. They issued a lot of really bad debt to monopolize the magazine rack in order to set page rates higher. As long as they were covering the debt payment and making payroll, all was good. Until magazine publishing went down like a Submarine with a screen door.

Prior to issuance of the debt, they were steadily profitable, managing to deliver mostly unique content across the titles. Afterword, there were fewer titles with fewer pages that cost a lot more to advertise in, that shared much more content than ever before.

I'd wager that Hobbico was probably a going proposition that got the itch to expand and control more distribution in an effort to set pricing higher, which the market would not and could not support for any length of time.

The real question is: what happens to remaining inventory? Who picks up the remaining brands owned wholly or in part by Hobbico.

Tom Mooty has the right idea: Play lotto.

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